The internet profoundly affects the lives of billions of people. The 2016 World Development Report will ask whether it is also a force for development. The Report will explore the internet’s impact on economic growth, on social and economic opportunity, and on the efficiency of public service delivery. It will analyze the factors that have allowed some businesses, people, and governments to benefit greatly from the interne—and others not. And to help countries better leverage the internet for development, it will identify the policy reforms in the information and communication technology (ICT) sectors, in the complementary sectors, and in the development community.
The short answer to the Report’s central question: digital technologies, including the internet and mobile phones, can undoubtedly be a force for development. They can improve the lives of the poor and share the gains from development more broadly. But realizing these benefits will not be easy or automatic, because the internet, while accelerating growth, can also accentuate existing disparities. Expanding internet access is urgent, but clearly not enough. Countries also need to invest in complementary factors that will boost the return on digital investments—by creating competitive markets, building a skilled work force, and providing incentives that reward transparency and accountability.
The 2016 WDR will show how the internet affects many aspects of development, most importantly by significantly lowering the costs of social and economic interactions. This has three consequences:
- The internet promotes inclusion and expands markets. The enterprise service company Samasource connects poor women and youth with internet-based microwork opportunities worldwide. Because lenders can use mobile phone records to assess credit risk, farmers borrow money—and banks find new customers. People can use their homes and cars to generate income in the new sharing economy. And e-commerce platforms such as Alibaba allow small companies in remote areas to reach new customers anywhere.
- The internet raises the efficiency of economic and social transactions. Delivery companies use the internet for real-time route-planning and tracking, saving time and fuel. Khan Academy tutorials and massive open online courses allow teachers to spend more time on individualized instruction. Digital payments for social transfers significantly reduce travel and waiting times for rural residents in Kenya and Niger. And integrating financial information systems across government units makes tax collection and budget planning more efficient and more transparent.
- The internet creates economies of scale, boosting consumer welfare and citizen engagement. When routine tasks can be automated, transaction costs essentially fall to zero. Many free or low-cost internet-based services that greatly benefit consumers range from job matching to digital payment systems, online news, and digital music. And the wide reach of social media and crowdsourcing facilitates collective action to make governments more accountable.
Digital communication through mobile phones and the internet is becoming not just an indispensable economic tool but also an aspirational goal for which poor people are willing to spend a large share of their income. It connects dispersed communities, encourages social learning, provides countless options for leisure, and contributes to greater security. Mobile phone penetration in developing countries is now almost 90 percent, but only 31 percent of the developing country population is online. So, for most of the world’s people the greatest impact of the digital transformation is yet to come.
For this transformation to happen, access to the internet in developing countries needs to be universal, affordable, open, and safe. The 2016 WDR will discuss the main elements of the ICT policy agenda, which includes not just infrastructure provision but also pricing, regulation, and governance—including complex issues of digital privacy and ensuring the free flow of data and information.
Internet access by itself will not guarantee widely shared benefits. Realizing the highest possible returns on internet investments will also require improvements in complementary factors. The 2016 WDR will identify these factors by analyzing the main channels for the internet to affect growth, opportunity, and service delivery, as well as the main risks facing businesses, people, and governments.
- For businesses, the internet raises the productivity of existing processes and makes new production processes possible, thus promoting growth. It facilitates new and more intensive trade, boosts the quality of capital through greater capital utilization, and increases competition as internet-using firms become more efficient. The main risk is that regulatory barriers that protect existing firms can reduce market entry and competition, reducing investments in digital technology and increasing economic divergence between countries.
- For people, the internet opens access to jobs and such inputs as finance, especially in developing countries and importantly for disadvantaged groups. It changes the returns to human capital, with significant effects on labor markets. And by exploiting scale economies, internet firms create new and cheaper services that raise consumer welfare, such as easier price comparisons, new forms of leisure, or instant access to knowledge. A major risk is that the internet’s automation of routine service tasks could destroy some jobs and change the skill requirements of others, disrupting labor markets and possibly increasing inequality.
- For governments, the internet affects the core aspects of governance and service delivery. It can increase government capacity to deliver services more conveniently, at lower cost and to all citizens. And it can support efforts to increase government accountability, through voice, client power, and collective action. The main risks are a large waste of public resources when ICT projects are poorly implemented and little used, and when elites capture benefits that should be shared by all citizens.
Based on academic evidence and operational experience, the 2016 WDR will identify policy priorities. Countries should ensure a competitive business environment that allows new and sometimes disruptive firms to enter markets. They should support education reforms and continuous skill upgrading to enable managers, workers, and officials to use technology most productively. And they should raise incentives for the public sector to deploy the internet more effectively for service delivery and to ensure that digital technologies become a tool for empowerment rather than control. A particular focus in the Report will be on approaches that use the internet to strengthen these complementary factors—say, by providing online training and education or by monitoring public service delivery. Finally, the 2016 WDR will also assess how new digital technologies can improve development practice, for instance, through faster learning and rapid feedback, better targeting, and investments in public goods and platforms.